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Building Pay Structures That Recognize Employee Contributions

Building Pay Structures That Recognize Employee Contributions . Chapter #9. Pay must recognize individual contributions. #1 Decide upon how many pay structures Exempt, Non exempt, by job families, by geography? #2 Determine market pay line. Look #213 Clerks. Grouping Jobs.

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Building Pay Structures That Recognize Employee Contributions

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  1. Building Pay Structures ThatRecognize Employee Contributions Chapter #9

  2. Pay must recognize individual contributions • #1 Decide upon how many pay structures Exempt, Non exempt, by job families, by geography? • #2 Determine market pay line. • Look #213 Clerks

  3. Grouping Jobs • #3 Define Pay Grades • Will you go • Wider? It will decrease hierarchy • Will you go narrow? It will increase hierarchy

  4. #4 Establish Pay Ranges • Look #215 • Establish mid points first • Then maximum then minimum rates • They should overlap so ee can be promoted without a pay increase

  5. Pay Compression #216 • New employees get paid equal to or more than established employees. • Not a good idea….equity theory • Internal equity • External equity • Green circle rates, lower than minimum • Red circle rates, higher than maximum

  6. #5 Evaluate results • Very important!!!!! • Index the relative competiveness of internal pay rates • Compa – ratios EE Pay Rate/Pay range midpoint • Compa = 1 means that ee pay =pay range midpoint • Compa = more than 1 means that ee pay is greater than midpoint • Compa = less than 1 means that ee pay is les than midpoint

  7. Designing Merit Pay Systems • Should encourage ees to perform at their best. • Research does NOT show that merit pay increases productivity UNLESS it is enough to be meaningful

  8. Timing • Will merit pay evaluations be on • Reoccurring ….Anniversary dates • Nonreocurring…..lump sum • Depends on efficient performance of ee • And ee’s [osition in pay range • Merit pay grid Look #222

  9. HR has to have a budgetfor merit pay disbursement • Budgets are a percentage of employee’s • Total base pay • 5% x $10,000,000 • Merits budget will be $500,000 • HR has to ask supervisors to indicate distribution according to performance ratings • Then HR has to calculate the expected number of ees that fall into each cell./

  10. Sales Incentive Pay • Design sales depends on • Sales volume? • New Product sales? • Overall sales growth? • Should it be • Salary only? • Salary plus bonus? • Salary plus commission? • Commission plus draw? • Commission only? • Draws Recoverable or Non Recoverable?

  11. Commissions • Straight • % of sales • Graduated • ` Increase sales increased commission • Multiple tiered • Increase $ only after a certain amount of sales

  12. Pay For Knowledge Designs • Depends on TRAINING • Access to Training • Inhouse or outsourced • Certification and Recertifications • SPHR PHR

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